The new law -- the latest in a series of crackdowns on smokers in California -- was signed into law by Hollywood icon Schwarzenegger on Wednesday at the state capitol in Sacramento.
Motorists can be issued with tickets for 100 dollars for violating the law, although cars would have to been stopped for another traffic offense before a ticket could be issued.
The legislation was one of a series of Democratic bills in California that have been criticised by Republicans as "nanny bills".
However health groups welcomed Schwarzenegger's support for the bill.
"If nanny government creates healthier kids, we're for it," said Paul Knepprath, vice president of government relations for the American Lung Association of California.
"We're pleased he signed the bill, not withstanding his own personal issues with tobacco."
California is the third state to ban smoking in cars carrying minors. Last year, Arkansas and Louisiana passed laws banning motorists from smoking in cars with children aged up to 6 and 13.